As the credit card industry has evolved and grown more competitive over the last twenty years, many credit card issuing financial institutions have attempted to distinguish themselves from their competition by introducing new features and benefits with their credit cards. Among these features have been programs that reward the consumer for using their credit card with reduced interest rates on the purchase amount, accrued rebates redeemable for specified products or services, or coupons redeemable at the time of purchase. Some of the more successful reward programs have been designed to motivate the consumer to make purchases at specific merchants.
It is common practice among the credit card issuers to include inserts with their monthly statements that market merchant products and services. The targeting for these inserts is based, however, on minimal cardholder information such as the cardholder's state, zip code, or credit card type. These sorts of inserts have been found to generate a very low response rate, i.e., have stirred little interest in consumers. It is believed that most cardholders discard the inserts without looking at them.
Focus groups conducted on this subject have found that consumers are interested in receiving discounts for products and services, but only for those items that they consider valuable. It is impossible to evaluate consumer interest in a product or service based only on the geographic location of the consumer's residence.
Merchants are continually looking for ways to effectively market their products and services. Discounts have proven to be an effective method for attracting and retaining customers. Today there are a number of vehicles available to the merchant to provide discounts to potential customers including bulk mailings, newspaper, radio and television advertisements, and targeted marketing.
Targeted marketing is particularly effective and efficient for merchants because it is designed to identify consumers that are more likely than the general public to be interested in the merchant's products or services. One proven method has been to identify consumers that have demonstrated interest by purchasing similar or related products in the past. One way for merchants to obtain such information has been to purchase consumer lists from various providers. These lists are again, however, generally based on rather limited, static targeting criteria.
Merchants thus desire a flexible, cost effective method for finding consumers who will be interested in their products or services. Consumers on the other hand desire discounts on products and services they want or need. Unfortunately, the structure of the bank card world (VISA and MASTERCARD bankcard) makes the accomplishment of these seemingly parallel goals difficult. Cardholder transaction histories, a key to determining cardholder preferences and thus successful target marketing, are owned and controlled by the cardholders' issuing financial institutions and are unavailable to merchants and their acquiring financial institutions who are separated from the cardholders and their issuers by the VISA and MASTERCARD bankcard interchanges, across which money, but not information, passes.
Merchants and their acquirers do not therefore have access to the cardholder information necessary to provide targeted offers, and issuers do not have the access to merchants necessary to design targeted offers deemed valuable by their cardholders. An individual financial institution that serves as both an issuer and acquirer may bridge the gap for its own merchants and cardholders, but targeting to this smaller subset of cardholders is obviously of less value to merchants and the limited range of merchant offers is similarly of less value to cardholders and will be less effective in stimulating card usage. The divide between merchants and their acquirers and cardholders and their issuers can be bridged however by a credit card processor that receives information from both sides of the interchange and has the processing capacity to perform the necessary offer matching, delivery, and fulfillment.